Talking factsheet: Jupiter Strategic Bond Fund

Ariel Bezalel gives an overview of Jupiter’s global flexible bond strategy, how the investment process works, and how the team seek to generate alpha. 

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Flexible, active and unconstrained fixed income

The Jupiter Strategic Bond Fund is a ‘go anywhere,’ high-conviction fund, meaning the managers are able to seek out the best opportunities within the fixed interest universe on a global basis while carefully managing downside risk.

Experienced, diversified
The large and highly experienced fund management team led by Ariel Bezalel, Director of Strategy, Fixed Income, and Harry Richards, Fund Manager, are constantly assessing the dynamics of global fixed income markets, managing risk in the portfolio through adjustments to asset allocation, security selection and duration management. The result is a flexible and highly diversified, global, unconstrained bond fund that can be the cornerstone of an investor’s fixed income allocation
Go anywhere approach
The fund managers aim to deliver returns for investors through a range of market conditions by diversifying across different types of debt and across the credit spectrum. As a ‘go anywhere’ bond fund, the team have the freedom to seek the best opportunities in the global fixed income universe. The team is structured to be able to react quickly to new ideas and changing market circumstances rather than having to go through investment committees.

No benchmark

The unconstrained approach means that investors are not tied to a benchmark, as the fund shifts between government, investment grade and high yield bonds. It also has access to more complex assets such as derivatives (which are primarily used to mitigate risk), contingent capital and emerging market debt.
Diversification potential
The ability of the fund managers to balance the portfolio between different subsectors of the fixed income universe can allow the fund to perform through a range of market conditions. Fixed income assets can act as a diversifier to investments in equities as the asset classes typically exhibit relatively low correlation to one another. The income stream from bonds may be more consistent than that provided by shares due to the defined nature of coupon payments. Furthermore, bonds can offer a means of providing an income above the interest rates available on savings accounts.
Investment philosophy
The team aims to maintain a balance between macro and credit risk. Long-term fundamental research underpins the active views. The team has an unconstrained investment approach and an emphasis on special themes. They favour credits with a clear commitment to de-leveraging and aim to identify and manage downside risk.

Credit research for ESG

The team ensures credit research captures environmental, social and governmental risks and opportunities. They also use access to management to highlight ESG issues.

Active interest rate risk management

The possibility to flexibly alter the portfolio duration of the fund provides the managers with an additional lever to cushion portfolio risk or even to benefit from changes in interest rates.

Please note

Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the individuals mentioned at the time of writing, are not necessarily those of Jupiter as a whole, and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. 

Jupiter Strategic Bond Fund

The fund can invest a significant portion of the portfolio in high yield and non-rated bonds. These bonds may offer a higher income but carry a greater risk of default, particularly in volatile markets. Quarterly income payments will fluctuate. The fund uses derivatives, which may increase volatility; the fund’s performance is unlikely to track the performance of broader markets. Losses on short positions may be unlimited. Counterparty risk may cause losses to the fund. In difficult market conditions, it may be harder for the manager to sell assets at the quoted price, which could have a negative impact on performance. In extreme market conditions, the Fund’s ability to meet redemption requests on demand may be affected. The Key Investor Information Document, Supplementary Information Document and Scheme Particulars are available from Jupiter on request. This fund can invest more than 35% of its value in securities issued or guaranteed by an EEA state.

Fund-specific risks

Interest Rate Risk – The Fund can invest in assets whose value is sensitive to changes in interest rates (for example bonds) meaning that the value of these investments may fluctuate significantly with movement in interest rates. e.g. the value of a bond tends to decrease when interest rates rise.

Pricing Risk – Price movements in financial assets mean the value of assets can fall as well as rise, with this risk typically amplified in more volatile market conditions.

Contingent convertible bonds – The Fund may invest in contingent convertible bonds. These instruments may experience material losses based on certain trigger events. Specifically these triggers may result in a partial or total loss of value, or the investments may be converted into equity, both of which are likely to entail significant losses.

Credit Risk – The issuer of a bond or a similar investment within the Fund may not pay income or repay capital to the Fund when due.

Derivative risk – the Fund may use derivatives to generate returns and/or to reduce costs and the overall risk of the Fund. Using derivatives can involve a higher level of risk. A small movement in the price of an underlying investment may result in a disproportionately large movement in the price of the derivative investment.

Counterparty Risk – the risk of losses due to the default of a counterparty e.g. on a derivatives contract or a custodian that is safeguarding the Fund’s assets.

Sub investment grade bonds – The Fund may invest a significant portion of its assets in securities which are those rated below investment grade by a credit rating agency. They are considered to have a greater risk of loss of capital or failing to meet their income payment obligations than higher rated investment grade bonds.

The value of active minds: independent thinking

 

A key feature of Jupiter’s investment approach is that we eschew the adoption of a house view, instead preferring to allow our specialist fund managers to formulate their own opinions on their asset class. As a result, it should be noted that any views expressed – including on matters relating to environmental, social and governance considerations – are those of the author(s), and may differ from views held by other Jupiter investment professionals.

Important Information

Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the speaker at the time of recording, are not necessarily those of Jupiter and may change in the future. This is particularly true during periods of rapidly changing market circumstances.

This communication is intended for investment professionals and is not for the use or benefit of other persons, including retail investors. This communication is for informational purposes only and is not investment advice. Market and exchange rate movements can cause the value of an investment to fall as well as rise, and you may get back less than originally invested. The views expressed are those of the Investment Manager(s) at the time of preparation, are not necessarily those of Jupiter as a whole and may be subject to change. This is particularly true during periods of rapidly changing market circumstances. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given. Issued by Jupiter Unit Trust Managers Limited (JUTM), registered address: The Zig Zag Building, 70 Victoria Street, London, SW1E 6SQ, which is authorised and regulated by the Financial Conduct Authority. No part of this document may be reproduced in any manner without the prior permission of JUTM.